Payday loan program rakes in millions from investors

MIAMI (AP) — The owner of a Miami-based payday loan company has bilked hundreds of investors out of millions of dollars and repaid others with money he acquired through a Ponzi scheme, according to a newspaper report and federal officials.

About 500 investors, many from South Florida’s Venezuelan-American community, were won over by Efrain Betancourt Jr.’s selling point of high-yield returns on their investments in his Sky Group USA, the short-term lending business Miami Herald reported.

the The Securities and Exchange Commission in Miami filed a lawsuit against Betancourt, 33, and his company in September, the report said. The agency accuses Betancourt of committing securities violations in a scheme that authorities are calling “affinity fraud.”

In addition to the SEC lawsuit, a half-dozen other lawsuits and arbitrations have been filed against Betancourt, according to the newspaper. He was not prosecuted.

Betancourt spent part of the $66 million in promissory notes on a lavish lifestyle that included a waterfront condo in Miami and a wedding to his fourth wife in Monaco, according to the SEC complaint. He is also accused of wiring money to his ex-wife and friends and using at least $19 million from a pyramid scheme to make interest payments to some investors to keep them in check.

The SEC complaint states that Sky Group and Betancourt falsely told investors that the company would use investors’ money solely to originate payday loans and to defray the costs of such loans. They were promised annual returns of up to 120% on the bonds.

“We continue to caution investors to be wary of investments that promise returns that seem too good to be true,” Eric I. Bustillo, director of the SEC’s Miami regional office, told the Herald.

The SEC is calling for permanent injunctions and fines.

The program lasted from January 2016 to March 2020, just before the start of the coronavirus pandemic, the complaint says, which says Sky Group faced a severe cash flow problem and was unable to make interest payments when countless borrowers with their payday loans in Investors’ promissory notes defaulted.

Court records and legal documents state that Betancourt also falsely claimed to have law and computer engineering degrees in the United States.

Betancourt repeatedly invoked his Fifth Amendment right against self-incrimination during testimony to an attorney representing former clients earlier this month, the Herald reported. In testimony before the same attorney in May, he admitted that he did not have a law or computer degree in the United States. But he insisted his payday loan business was legitimate, calling the investors “lenders” who were involved in financing short-term, high-yield loans, which he called “business transactions.”

“I’ve made it very clear that they invest in a payday portfolio,” Betancourt told attorney Rick Diaz.

In a motion to dismiss the lawsuit, Betancourt defense attorney Mark David Hunter argued that promissory notes are loans and not securities like stocks and bonds. Therefore, Hunter said Betancourt and Sky Group did not break the law by failing to repay the lenders.

Diaz described Betancourt as a “mini-Madoff,” a nod to the late New York financial adviser Bernard Madoff, who ran the largest Ponzi scheme in US history.

“I have treated, deposed and defended Ponzi schemers over the years,” he told the Herald. “Efrain Betancourt is the smoothest, cruelest and most arrogant, selfish and narcissistic of them all.”

Andres Zorrilla, Diaz’s client, told the newspaper he became suspicious when Betancourt didn’t answer his calls and ignored his emails when he tried to withdraw $30,000 from his investment in the company to cover the cost of the medical to meet his mother’s expenses. One of his emails contained a photo of his mother showing the surgical stitches from brain surgery.

“The guy just stole money,” said Zorilla, 38, adding that he also referred his wife, her brother and several other business partners to Betancourt’s company. In total, Zorrilla and his immediate family invested $150,000 in the company. They received some interest payments but lost all their capital.

“He made a lot of money and he went a little crazy with the money,” Zorrilla said.

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